It is almost certain that when the Kansas Legislature gathers on April 27th for the 2016 Legislative Wrap-up session that we will face a substantial reduction in anticipated revenue for the remainder of the current fiscal year. Tax receipts were $54 million below official estimates in February, and lawmakers are bracing for more bad news when the March numbers are revealed. Shawn Sullivan, the Governor’s budget director expects the consensus revenue estimating group to once again lower its revenue targets when they meet in April. “I would expect, and I think anybody who sees the balance sheet and revenues coming in would expect that it will be decreasing further.” Sullivan said. Rep. Steve Johnson, a Republican from Assaria and a key member of the House tax committee said he is expecting revenue shortfalls in each of the final three months of the fiscal year: April, May and June. Johnson added that he has been warned to expect a total shortfall as large as $200 million by the end of this fiscal year. A number of State Representatives and State Senators have been working on tax plans that would reimpose the tax on business income. But Governor Brownback and other supporters of the tax cut argued that that business owners will use the tax cut savings to deliver a “shot of adrenaline” to the Kansas economy by creating tens of thousands of private sector jobs. That hasn’t happened. In fact , the most recent report from Kansas Department of Labor said that the state has lost more than 5,000 private sector jobs over the last year.
Representatives and Senators who once supported income tax cuts are starting to reverse their positions with new bill introductions. Representative Mark Hutton (R-Wichita), has introduced House Bill 2444 that eliminates the business non-wage income tax exemption and uses the money to reduce sales tax on food. Rep. Hutton tried unsuccessfully last year to eliminate the business income tax break, saying the cuts were not working to grow the economy. The food sales tax would be reduced to 2.6 percent. No information is available on how much income tax would be raised or how much food sales tax would be lowered. The bill would not help the state with its budget problems because it is designed to be revenue neutral. Meanwhile, three senators have introduced legislation that puts some business owners back on the income tax rolls. Senate Vice President Jeff King (R-Independence), Senator Jim Denning(R-Overland Park) and Senator Greg Smith(R-Overland Park) indicates that their bill will differentiate between wage and non-wage income. It would tax 70 percent of the income earned by a business as wages and leave the other 30 percent tax free. Governor Brownback has said that he will veto any legislation that reverses any of the income tax cuts.
The Kansas Senate has passed out a local property tax lid bill. The bill number for the property tax bill is House Bill 2088. The bill is now in a House – Senate conference committee and is expected to be worked when the legislature returns on April 27, 2016. The following is what is in the bill as it was passed by the Senate. 1) The effective date of the bill is January 1, 2017.
2) Spending cannot exceed the Consumer Price Index for all Urban Consumers. 3) A budget that goes above the allowed tax lid would require approval by local voters. 4) There is an exemption for spending on “judgements or settlements of legal actions against the city or county and costs directly related to such judgements and settlements. 5) There is an exemption for expenditures that are specifically mandated by the federal or state law. 6) There is an exemption for property taxes levied by a subordinate government, such as a library district. 7) Bond and interest payments are exempt. 8) Exempt from the lid is “The construction of any new structures or improvements or the remodeling or renovation of any existing structures or improvements to real property. 9) Also exempt are expenses related to a federal, state or local disaster or emergency. As stated this bill is still in a conference committee and will probably be changes during the negotiation of the bill.
The Kansas Legislature has passed a bill that attempts to satisfy the Kansas Supreme Court’s equity decision on funding of Kansas public schools. The bill passed the House and Senate a mere 48 hours after being introduced. A number of legislators who debated the equity finance bill expressed deep concerns that the bill will not satisfy the Kansas Supreme Court’s ruling. The court has determined that the legislature has until June 30, 2016 to fix the problem or Kansas public schools will be unable to operate. Legislators have been trying to assemble a funding plan that would address the equity issue. Some plan options include returning to portions of the school finance formula, change the current block grant law or write a new formula that is constitutional. The bill that was passed by the legislature re-distributes capital outlay and local option budget funding that will cost only about 2 million dollars. The plan also determines that no school district will lose any funding from the previous year’s budget.